Correlation Between Worthington Industries and Allegheny Technologies

Can any of the company-specific risk be diversified away by investing in both Worthington Industries and Allegheny Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Worthington Industries and Allegheny Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Worthington Industries and Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Worthington Industries and Allegheny Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Worthington Industries with a short position of Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Worthington Industries and Allegheny Technologies.

Diversification Opportunities for Worthington Industries and Allegheny Technologies

-0.62

Correlation Coefficient

Worthington Industries  Allegheny Technologies

Excellent diversification

The 3 months correlation between Worthington and Allegheny is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Worthington Industries and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies and Worthington Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Worthington Industries are associated (or correlated) with Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Worthington Industries i.e., Worthington Industries and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Worthington Industries and Allegheny Technologies

Considering the 90-day investment horizon Worthington Industries is expected to under-perform the Allegheny Technologies. In addition to that, Worthington Industries is 1.03 times more volatile than Allegheny Technologies Incorporated. It trades about -0.31 of its total potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.09 per unit of volatility. If you would invest  5,992  in Allegheny Technologies Incorporated on March 13, 2024 and sell it today you would lose (196.00) from holding Allegheny Technologies Incorporated or give up 3.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Worthington Industries  vs.  Allegheny Technologies Incorpo

Worthington Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worthington Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Allegheny Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allegheny Technologies Incorporated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Allegheny Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Worthington Industries and Allegheny Technologies

The main advantage of trading using opposite Worthington Industries and Allegheny Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worthington Industries position performs unexpectedly, Allegheny Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Allegheny Technologies will offset losses from the drop in Allegheny Technologies' long position.

The idea behind Worthington Industries and Allegheny Technologies Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.